We talk to startups and investors, you get the value.
Water, food in the fridge, roof over your head, safety, internet. Is anything redundant here? Certainly not. Today Internet access has become a basic need, especially for those who work remotely. The Ukrainian startup nect WORLD has developed a modem that gives access to the Internet around the world without too much hassle. Misha Rudominsky, the CEO of the startup, told us what the product is about, how to produce high-quality devices and launch successful crowdfunding.
We talk to startups and investors, you get the value.
In November 2018, my friend and I went to a cafe with Wi-Fi to work there. We were trying to catch a waiter for 20 minutes to find out the password, but he was very busy as the café was bustling with visitors. When we finally got connected, the speed was so slow that we had to change the place. So, we wasted our time.
At that moment I thought that it would be cool to have a handy solution for fast Internet access that you can take anywhere you want. Without buying local SIM cards in new countries and stuff like that.
Surprisingly, no suitable solution was found. Popular USB modems require sim-cards replacement or work with a specific operator. Hotspots in smartphones give low speed, because their processors are busy with other things, besides transferring data from Wi-Fi network to LTE and back. Both ways fit as a temporary solution, but it’s not practical to work with such internet all the time.
Thus suddenly we faced the problem and quickly came up with a solution. We polled the target audience, analyzed the market and understood that such a new modem, perfect for freelancers, digital nomads and simply active people, will definitely find its buyer. So, I decided to launch my sixth business project: nect MODEM.
We’ve made two versions of the prototype this year, and this spring we’ve started a crowdfunding campaign on Indiegogo. The first goal was to raise $30,000 to release the first batch of devices, and we quickly achieved it. Today, we have raised more than $200,000.
Nect MODEM is a portable gadget with uninterrupted and reliable internet and compatible with all laptops. We negotiate with operators about favorable tariffs for our clients and pass traffic through our VPN for data protection.
What’s more, you can use the device without our services, with a sim card of any operator. In this case you will also have high speed connection in a small and stylish design, while the payment for the traffic will be based on the tariffs of an operator, whose sim-card is in the modem.
You can put a physical sim card into nect, or you can use an eSim. All you have to do is to make a couple of clicks in our application and a new operator profile with a favorable tariff will appear. No physical card replacement. You can choose a traffic package in advance before your trip, by the way.
The whole nect structure is designed for fast Internet operation. A dedicated CPU (assigned to a single function) and direct communication via USB allow you to unlock the full power of 4G/LTE networks. If the base station provides 150 Mbit/s, the nect user will get roughly the same speed. Many operators have a speed limit of 50 Mbit/s, so our modem provides approximately 49.5 Mbit/s; that is, there is almost no speed drop due to the modem.
A hotspot in a phone or as a separate device is much slower because you need to connect two networks, and this is a resource intensive task. You can expect 10–15 Mbit/s from a hotspot in the same conditions. If you plug in your smartphone as a USB modem, the connection speed will be about half that of nect.
The modem’s goal is to find the most powerful tower, connect to it and transmit data as quickly as possible. There are no other tasks. We give you a straight tunnel to the Internet, from which all the obstacles are removed.
Nect MODEM is attached to the laptop’s lid. To do this, you need to attach a thin and adhesive layer of metal to the lid, and the modem would hold magnetically. So it can be easily removed if necessary.
For more convenience we have added a hotspot: you can share the Internet with 10 devices via Wi-Fi. And thanks to the shape of the modem, it does not stick out of the laptop and there is no danger of breaking the port.
The price of the device was $79 for the first customers. Then it went up to $89, $99 and at the moment it is $109. But this is a presale price, to buy the device in a store will be more expensive — $139. As for geographic segmentation, 67% of our target customers are from the United States and Canada, and the rest are from all over the world.
Tariff plans are now available for nect in 208 countries and territories. Surely the internet is available in the U.S. and EU. This coverage was quickly achieved through cooperation with a major roaming partner, who in turn negotiated with other operators worldwide. We offer their services to our customers on special terms.
We negotiate directly with operators about a better price for users of our devices. We offer operators to bring several thousand customers in exchange for special conditions. Now we are doing this in the USA. Next, we will look where our devices are mostly used and will negotiate an offer of cooperation with operators from those regions.
It’s important to find better prices for internet. Consequently customers will buy more traffic and we will earn more. We’re planning to make profit from both the sale of devices and the sale of communication services.
According to our plan, approximately 50% of nect MODEM owners will buy communication services through us and 40% will use our VPN services. We don’t want to impose anything on our users. We offer an effective solution: fast internet speed, favorable tariff and the necessary additional service; besides the offer is flexible and everything can be adjusted to your needs.
As the company grows, we will offer lower tariffs, because the more users we have, the more interesting we become for operators. The goal is to get as close as possible to local communication tariffs.
We come to operators as a startup and explain that so far we have few users, but next year we are planning to sell tens of thousands of devices and if they support us, they will get many new customers. We always get an adequate response, as we can show the feasibility of our plans. What’s more, it’s cool and fashionable in the U.S. to support startups.
Negotiations became easier when our Indiegogo campaign has raised more than $100,000. Successful crowdfunding shows that the product is in demand and thanks to cooperation with us it is possible in future to get sales growth of a couple of percent. So we came close to the agreement with one of the American operators, which will be able to offer the cost of one gigabyte 40% less than the market average.
Interestingly, it turned out to be equally difficult to find decision makers and start negotiations with American operators and the Ukrainian Life operator, though the companies differ in size by 50 times.
One can say that we have a group of competitors. Within it, the offers are too similar to be distinguished. We’re talking about Wi-Fi hotspots with their own tariff plans. Some are selling their designs, while others are simply putting their stickers on faceless Chinese devices. At first we thought of separating these companies, but we found so many similar offers that we decided to combine them into one group, because marketing is the same for everyone.
In this group we can distinguish Skyroam, which has its own interesting design, technology and tariff plan. This company also uses an original marketing approach: not to sell as much as possible, but to communicate with the audience and build long-term loyalty through access to additional services and various bonuses. Apparently, the strategy works: in September 2019 they closed over $20 million in a Series С funding round.
The main problem for users of these companies is that you cannot insert your sim-card and change a tariff. The companies sell the device and continue to make money by selling more traffic. We, on the other hand, offer different tariffs and you can choose one or insert a sim-card of any operator.
Our core team consists of two engineers: me and Alexey Oleynik, our CTO. Lyusya Ivanova, CCO of nect MODEM, is responsible for communications, and Marina Zaporozhets, our brand manager, ensures correct marketing positioning. Five other engineers and a designer work with us as employees.
Thanks to the talents and persistence of the whole team, we have developed a prototype that is working properly. Still the process was long and painful. Hardware is hard.
We were going to launch crowdfunding in the summer of 2019, but due to technical difficulties we had to make the second version of the prototype, which had been supposed to be ready by December, but then it needed to be improved and eventually we started on Indiegogo only this spring.
Basically, we were developing the product from scratch. We buy only a GSM module because it’s difficult, expensive and pointless to develop. Everything else is our own design: we have chosen this way to get a really fast and reliable device.
Nect MODEM has many innovative solutions, which started with the question: “ Is it possible to do this?” Most often the answer was, “I don’t know.” We understood that we had to spend weeks of time and a lot of money to test everything, and we did that. And surprisingly enough almost all of our slightly crazy ideas worked well. That risk was our main challenge.
We’ll manufacture our own boards and cases. For this purpose, we are now choosing a contractor from electronics manufacturers in Lithuania and Poland. It is critically important for us to keep all stages of production under control so that the product realistically meets our promises.
To get a quality product from the Chinese workers, you need to pick up the factory, build a production control system, send specialists there, conduct a bunch of tests etc. For us it is much easier to produce a product in Europe. In fact, it’s not that expensive. And the more you develop on your own, the cheaper it is.
Working with manufacturers in China has another problem — copying. When they have technical drawings and schemes of your product, they can make their version more quickly. Sometimes, the Chinese make the device’s clone before crowdfunding ends. They manage to refine the product, change its functionality, replace materials with cheaper ones in weeks, and start selling it on AliExpress.
Don’t count on organic traffic. You shouldn’t expect people to visit Kickstarter or Indiegogo for some reason, notice your product and buy it. It doesn’t work like that. The platform gives you a certain level of trust and the ability to raise money. That’s it. Most of the money comes from good old-fashioned advertising. Thus, you need money to raise money.
Crowdfunding is not fundamentally different from any other online sale. To increase conversion, you also need to reduce the number of steps on the way to a purchase. We first started to gain the advertising traffic and only after clicking the button “Buy” our website visitors were taken further to Indiegogo. Then we removed this step and postponed color selection and shipping costs till the post-campaign period. That made a remarkable difference.
A simple checklist to prepare for a launch:
1. Check if the project is suitable for crowdfunding or if there are any available grants or venture money.
2. Find a successful marketing agency which specializes in the promotion of such campaigns. We met our agency at CES. They have already secured more than one million deals, so we were relaxed and confident of the result.
3. When the campaign is underway, the main task is to increase the product’s recognition. Try to get into articles, give interviews, and appear on talk shows.
At the start, I needed the minimum amount of money to do tests, find and interview the target audience. I figured that $2,000 was enough. But when you’re 19 years old, it’s impossible to get money from any investor for such a raw idea. That’s why I went to my parents. I said I’d work off the debt if my business idea didn’t fly.
After the FFF round, business angels from Ukraine and then the fund came to the project. In total, the nect team attracted $225,000. We can call it a pre-seed round, although it was very undefined in time.
The Boomtown accelerator invested $35,000 in our project. We went through a three-month program, which showed how to break into the American market and gave access to the network of investors and specialized experts.
The money invested in the project helped to assemble a flexible team. Instead of a long and meticulous gathering of like-minded people with all the competence and willingness to work for the option, we found reliable partners who work with us on a contract basis. Hence we launched the product faster.
In early 2021 we are going to release a new version of nect — a 5G modem. And by the end of 2020 we are going to sell 25 thousand modems. To improve our results, to enter new markets and to launch 5G nect, we raise a seed-round of $1 000 000. We want to close it by the end of this year. This sum doesn’t include the money we have already raised through crowdfunding.